Main pilots' union SNPL at Transavia France (TO, Paris Orly) has agreed to the launch of the low-cost carrier's domestic routes as its parent, Air France-KLM, seeks to address the permanent unprofitability of this market segment.

"This agreement permits Transavia to operate routes within France, and adjusts pilot guarantees pertaining to European network activity in line with the levels of activity expected on the domestic network over the coming years," the Franco-Dutch group said in a statement.

Transavia France plans to announce the details of its new routes and the timeline for launch "shortly". It currently does not operate any domestic flights in France. It said that it would operate these flights from Paris Orly in parallel to its growing European operations from the airport.

However, the group revealed more details in its half-yearly earnings report. According to the plan, Air France (AF, Paris CDG) itself will continue to operate shuttle flights from Orly to Toulouse Blagnac, Nice, Marseilles, and Corsica, as well as an increased number of flights to French Overseas Territories and Departments (Cayenne, Pointe à Pitre, Fort de France, and St. Denis de la Réunion). Transavia would take over the remaining routes from Orly, including to Brest Guipavas, Biarritz, Pau, Perpignan, Montpellier, and Toulon.

The group said that Transavia would also continue to expand from its bases at Nantes, Montpellier, and Lyon St. Exupéry. Out of Lyon, it will take over the most in-demand domestic routes to Nantes, Bordeaux, and Toulouse, while the remainder will be served by HOP! (A5, Paris Orly).

The new agreement was backed by over 90% of the voting union members, with a turnout exceeding 82%. It is the second agreement with SNPL geared towards the growth of Transavia France after the union approved the expansion of the carrier's fleet beyond forty B737s in July 2019. According to the ch-aviation fleets advanced module, the French LCC currently still has forty B737-800s. It is operationally separate from Transavia Airlines (HV, Amsterdam Schiphol), which operates seven B737-700s and thirty-five -800s.

Air France-KLM said that its domestic restructuring would also include the closure of all routes from Orly where an alternative train journey takes less than 2.5 hours. Air France plans to replace its A318-100s and A319-100s with A220-300s. The mainline and HOP! will continue to focus on growing operations out of Paris CDG.

While the group did not go into details about the future of HOP! in light of the domestic ambitions of Transavia France, daily Le Figaro reported that the regional subsidiary plans to lay off at least 1,000 staff, over 40% of its total headcount. The current restructuring plans last through 2023 and the future of HOP! beyond that date is still undecided, although reportedly the group questions the need for the unit.

During the group's half-yearly earnings call, Chief Executive Ben Smith said that Air France-KLM would also adjust the delivery schedule of its forthcoming widebody aircraft.

"In the short term, linked to delays in production of Airbus and Boeing in response to the crisis situation at hand, some Airbus A350-900 deliveries at Air France and some committed and uncommitted Boeing B787-10 delivery at KLM Royal Dutch Airlines (KL, Amsterdam Schiphol) have been postponed," Smith said.

The group also deferred the decision about the replacement of B737NG narrowbodies at KLM until at least 2024. The Dutch airline currently operates sixteen B737-700s, thirty-one -800s, and five -900s.

"We do have a lot of flexibility on the Air France side with our B777-200(ER) fleet and at KLM with the A330 fleet. We're using those two aircraft types as flexible capacity when demand returns. And then on the narrowbody side, Air France will have a lot of leases that are coming up for renewal, which do not need to be extended," Smith added.

Due to the deferrals of deliveries and other changes, Air France-KLM cut its projected capital expenditure for 2020 to EUR2.1 billion euros (USD2.5 billion), down by EUR300 million (USD355 million) from the projection at the end of the first quarter.